In this article, we will cover Exness opinions alongside reporting from Barron’s, which is a commercial partner of Exness.

Market uncertainty can cause paralysis for even the most experienced traders, but it also puts analysts and journalists in a position where giving valuable information becomes tricky. Volatility can send the news bullish today and bearish tomorrow. And if you are late to the party, it could cost you dearly.

Learning how to navigate 2024 volatility is a must that requires some investigation and research. With that in mind, have a read of this superb analysis and strategy by Barron’s, and plan to use volatility to your benefit in the coming year.

Volatility Is Good. How to Use It.

BY STEVEN M. SEARS | UPDATED FEB 07, 2024 01:30 AM EST

If interest rates aren’t going to increase, does it matter when the Federal Reserve cuts rates? The question must be posed in light of the market mob’s temper tantrum after Fed Chairman Jerome Powell said in a 60 Minutes interview Sunday night that rate cuts might happen later than expected. We noted as much in early January, but the market mob hears what it wants to hear when it wants to hear it. Yet it ignored the most obvious fact: The stock market, and economy, are doing just fine with the 10-year Treasury note yield above 4%. Earnings season is under way, too.

Reports are good for many companies, and excellent for some. Many investors seem surprised that corporate profit margins are quite robust—and that companies have teams of executives who are focused on improving profitability. Recent economic data has been better than expected. The economy miraculously seems to have adjusted to the pressures of higher rates like a weightlifter whose training regimen makes him stronger. Those are the facts. Clearly, price volatility is good for stocks, especially when indexes are near record highs. When stocks decline in an orderly, nonpanicked fashion, as occurred earlier this week, it’s actually healthy for the stock and options markets.

Traders refer to such conditions as a “two-way flow,” as it brings together natural buyers and sellers. The price weakness clarifies investor sentiment, and that often increases options volatility. Why? Investors tend to buy bearish put options when something challenges their bullish views, and that increases implied volatility. The latest stock kerfuffle should therefore be viewed as a reminder of the merits of an options strategy that we have long called “time arbitrage.” When stock prices weaken, long-term stock investors can take advantage of short-term fear by selling cash-secured puts on favored stocks—a strategy that requires investors to have the money to buy shares at the strike price. This enables long-term investors to monetize the fear of other investors. 

Scared investors often rush to buy puts, usually paying too much to hedge. They become insensitive to price, and that is what makes the time arbitrage strategy so enticing. Investors should thus have a list of stocks they want to own, or want to buy more of. They also should take note of investment themes that represent key trends shaping the world around them, like artificial intelligence, the aging of America, the rise of private financial markets, and healthcare innovations. When the market mob panics, time arbitragers can enter orders to sell cash-secured puts to fellow investors who will pay just about any price you ask. Most of the time, the burst of fear is over in a day or so, and the stock price bounces higher and settles above the put strike price. 

This means that anyone who sold puts gets to keep the money they received for selling the contract. The worst case is that the stock falls below the put strike price, and the put seller gets paid by the options market to buy a stock they wanted to own anyway. Consider Equinix. The data center operator is a play on rising demand from corporations that need places to store all their servers and related equipment. With the stock around $838, investors could sell a cash-secured March $760 put. Should the stock be above the strike price at expiration, investors keep the put premium. If the opposite happens, investors must buy the stock or roll the position to avoid having to do so. Time arbitrage has some other important qualities. It creates order in moments when little exists, and it keeps investors aligned with the merits of buying quality stocks when they are mispriced.

As we approach the release of their fiscal quarter earnings reports for December 2023, investors and analysts alike are keenly awaiting insights that will shed light on both companies’ financial health and strategic directions. 

This article delves into the recent stock performance, financial metrics, and technical analysis of these behemoths, offering a comprehensive overview of their current standing and future prospects. 

PepsiCo, Inc. (PEP)

Shares in PepsiCo, Inc. managed to recover some of the losses incurred in the previous quarter, although they are still in an overall loss year over year. The company is expected to report its earnings for the fiscal quarter ending December 2023 on Friday, the 9th of February, before the market opens. The consensus EPS forecast is 1.72 USD, compared to the result for the same quarter last year of 1.67.

The rather negative image of the company’s performance is also reflected in the financial statements. As of 30 September 2023, the company did not have the ability to repay its short-term liabilities with the current assets at hand, with a current ratio recording just 88%. The net income of the company took a beating in the first quarter of 2023 and has struggled since to recover to higher sales figures. On the other hand, the dividend yield of the beverage giant is just shy of 3%, which is highly appealing to longer-term investors.

On the technical side, the price has been trading in a triangle formation for the last four months, with the price approaching the end of this formation in the coming sessions. So far, the boundaries of the triangle have been respected without any whipsaw outside the formation. The price has reacted to the resistance of the upper band of the Bollinger Bands recently and is currently correcting to the downside, with the 38.2% of the weekly Fibonacci retracement level acting as support. The Stochastic oscillator is recording extreme overbought levels, while the 50-day moving average has recently crossed above the slower 100-day moving average, indicating that the trend might still be bullish for the time being.

Coca-Cola Company (K)

Coca-Cola Company’s share price rose by 5% in the last quarter of the year and managed to regain some of the losses incurred in the previous quarters of the year. The company’s earnings report for the fiscal quarter ending December 2023 is set to be released on Tuesday, the 13th of February, before the market opens. The consensus EPS for the quarter is 0.48, compared to the same quarter last year of 0.45.

The company had consecutive increases in its net income throughout the entirety of 2023, with the last recorded figures on 30/09/2023 showing an increase of around 8% year over year. Cash on hand also marked a 16.75% increase year over year, while the long-term debt was reduced by almost 4%. Adding to the positive image is the dividend yield, which is slightly more than 3%, making the shares of the beverage giant an attractive addition to any long-term investor’s portfolio.

From the technical analysis perspective, the price has faced strong resistance on the upper band of the Bollinger Bands as well as the 61.8% of the daily Fibonacci retracement level and has since corrected to the downside. The 50-day moving average is trading well above the slower 100-day moving average, validating the overall bullish momentum in the market. At the same time, the Stochastic Oscillator is near the extreme overbought level, hinting that there might be a continuation of the recent correction in the near short term. 

On the other hand, the 20-day moving average is acting as support, which could completely decline the correction narrative since it is also combined with an inside support level where the price reacted in mid-January and could potentially support the downward momentum of the price, resulting in a resumption of the bullish direction.

In January 2024, at long last, multiple bitcoin ETFs were approved by the US Securities and Exchange Commission. It’s been called the most significant move in bitcoin history since its inception. The floodgates finally opened for institutional investors…and then, nothing happened. Their lackluster response was a huge shock to the crypto community, but not to all of us. Some of us were expecting it.

Why didn’t bitcoin react when the ETF was approved? 

Nobody knows the whole picture, so the best we can do is speculate based on small pieces of the puzzle. Here’s one possible narrative explaining the last rally, the current stagnation, and what will come.

Why didn’t bitcoin rise after the ETF was approved? Because bitcoin institutional money was probably already priced in.

In October 2023, bitcoin leaped out of a very stagnant $26k range up to $34k, and then on to $44k shortly after. Who’s money was buying those bitcoins?

Before the rally began, there were already 11 applications for a bitcoin ETF. Some of the largest investment fund managers in the world had a stake in the evolution of crypto, and whispers of SEC approval were in the wind.

Obviously, BlackRock and the other 10 companies would soon need to own enough bitcoin to match their incoming orders, and what better time to buy than at $26k?

The rally ramped up. Mainstream media barely mentioned the 69% rise — too busy chasing war and US politics. Something was different about this rally: we’d seen big hypes and small moves before, but this was a huge move with no hype whatsoever.

As bitcoin passed $40k, the risk on return hit a clear tipping point, and Buy orders faded, leaving only minor retail volatility. The stage was set for the coming ETF adoption.

Before we get too deep into this possible narrative, here’s a simple question: if you were a billionaire, would you want to be the first investor to test bitcoin ETFs?

What will break the equilibrium?

This is a standoff. Retail traders, institutional money, and ETF managers are all at the same table for the first time in history. Nobody wants to show their hand first, but that’s all about to change. What timing and what a coincidence: the 4th bitcoin halving is just months away.

This next halving is expected around April 2024, when the reward for mining new blocks will be split from 6.25 BTC to 3.125 BTC. Halvings are a built-in feature of the bitcoin protocol designed to control the cryptocurrency’s supply — and make it more scarce. In other words, it’s a mechanism for raising the price.

Halvings occur approximately every four years and are followed historically by significant price increases. Look at the last three bitcoin splits and how the price reacted:

• In the first halving (28 November 2012), the price jumped from $12 to $1,242.
• The second halving (9 July 2016) drove it from $641 to $20,089.
• And again, for the third halving (11 May 2020) prices rocketed from $8,246 to $68,789.

Given all that, here’s a very basic hypothetical example of how this might go down next time.

Rocky has $100k in fiat currency. He buys a bitcoin at $26k from an exchange.

Rocky then privately sells the bitcoin to a friend for $44k. Rocky now has $118k in fiat currency and no bitcoin. He gained $18k.

But what if bitcoin hits $62k and the friend sells the bitcoin ETF back? Rocky loses $18k. Break even? Not exactly.

Rocky’s worth is now $56k in fiat currency, alongside $62k in bitcoin, netting him $118k. But bitcoin is still not fiat currency, and the final tally only happens when all assets are returned. Nevertheless, what appears to be a losing proposition turns out to be profitable.

What would you do, if your clients were about to buy a truckload of bitcoin at $44k, and you knew the price would rise above $62k? You might buy more bitcoin for yourself.

This brings us back to the original narrative: what if the recent rallies were ETF bitcoin acquisitions to cover more than half the bitcoin ETF trading volume? In that case, the ETF managers will also profit from holding an excess of bitcoin.

Whatever happens, anyone already holding bitcoin from the $26k range will probably have a very good day very soon — probably.

Conclusion

Nobody knows how the future of bitcoin will play out in the coming weeks, and if someone does, you can be sure they are keeping it to themselves. The narrative in this article is just one of so many possibilities that await bitcoin traders in 2024. It’s all so uncertain, probably the biggest reason bitcoin prices haven’t surged — yet.

You can be sure of some very dynamic bitcoin trading volumes once the halving party gets started, and you, as a trader, not only get to witness it, you get to participate in it. Exciting times indeed.

The next halving is expected to occur around April 2024; however, the exact date is as yet unknown, as it depends on the speed at which new blocks are mined. Just be sure you’ve got plenty of equity, a realistic and cautious leverage setting, and nerves of steel.